Specifically, its core customers are fighting with high unemployment, low wages and economic uncertainty across the board … and while you’d think that might actually drive sales at the low-cost retailer, those points have resulted in three consecutive quarters of same-store sales declines.
As a result, WMT was forced to lower its full-year earnings guidance during its third-quarter earnings report Nov. 14. Then, just a couple days ago, Walmart announced that CEO Mike Duke was being replaced by international chief Doug McMillon.
These issues haven’t deterred Wall Street, with WMT shares trading near all-time highs, just shy of the 80 level. This region has long been a thorn in Walmart’s side, firmly capping the stock on multiple occasions so far in 2013. What’s more, WMT stock currently is overbought following their recent run higher, leaving shares vulnerable to potential short-term selling pressure.
Given Walmart’s fragile short-term state, weaker-than-expected Black Friday sales figures could spell trouble for the shares. A short-term dip of about 2.5% to support at WMT’s 20-day moving average is certainly not out of the question. To take advantage of such a move, traders might want to consider a Jan 77.50/80 bear put spread.
At the close of trading Monday, this spread was offered at 85 cents, or $85 per pair of contracts. Breakeven lies at $79.15, while a maximum profit of $1.65 is possible if WMT closes at or below $77.50 when January options expire.